Handle With Care

JPMorgan’s Warning to Private Credit Market

Banking giant JPMorgan has marked down the value of certain loans held by private‑credit groups, unnerving a market that has grown to $3.5 trillion in assets as of 2025. The markdowns hit particularly software‑sector loans, an area once seen as safe but now pressured by slower growth and AI‑driven competition.

Banks rarely adjust loan values unless they see trouble ahead. The move suggests lenders are bracing for a tougher environment for private credit, even as it continues to expand at record speed.

What Is Private Credit?

It’s money lent to companies by non‑banks: investment funds, pension funds, and specialist lenders like Ares and Blue Owl.

Deals usually come with flexible terms and higher interest rates, accounting for more risk. After the 2008 financial crisis, banks tightened their purse strings, so private lenders stepped in. It has become essential for small and medium-sized firms that struggle to get bank loans.

But it’s no longer just a small‑business story. Private lenders bankroll large buyouts and M&A deals, competing with investment banks. Apollo, for example, is providing debt funding to Paramount in the ongoing Warner Bros takeover.

High Reward, Hidden Risks

Private credit offers higher yields, but the risks sit below the surface.

• Loans are illiquid and valued privately, so it’s hard to know if they’re priced realistically.
• Many deals involve highly leveraged borrowers, making them vulnerable when rates rise or cash flows weaken.
• The use of PIK (payment‑in‑kind) loans is also increasing, letting borrowers pay interest with more debt instead of cash.

If the economy slows down and defaults rise, losses can hit pensions, insurers, and funds that rely on this income.

Withdrawals Hit Big Funds

The markdowns landed during a surge in investor withdrawals from private‑credit vehicles. BlackRock capped redemptions after a spike in requests, and Blackstone’s private credit fund faced similar pressure.

landed during a surge in investor withdrawals from private‑credit vehicles. BlackRock capped redemptions after a spike in requests, and Blackstone’s private‑credit fund faced similar pressure.

These loans are illiquid, meaning the funds can’t sell assets quickly when investors want out.

Transparency Under Scrutiny

Private credit loans aren’t publicly traded, and while most bank loans aren’t either, bank‑originated corporate loans are often syndicated to institutional investors, creating more pricing signals, external scrutiny, and regulatory oversight. Private‑credit funds rely on internal models, with far less external oversight.

That works when borrowers are healthy. It gets murky when they’re not.

JPMorgan CEO Jamie Dimon captured the mood with a blunt warning late last year after the bankruptcy of First Brands, a heavily indebted auto‑parts supplier that relied on private credit. “When you see one cockroach, there are probably more,” he said during an earnings call.